Millionaire for the Week

It is incredible the amount of perspective you get when seeing that the “grass is not necessarily greener on the other side.” My travel here to Colombia has given me some perspective on a number of things. While my thoughts may be criticized a bit, I have come to rethink my perspective of the US dollar for the short term. My thoughts of cryptocurrencies and precious metals have not changed towards being my best choices for storing the value of the little wealth we are able to accumulate from our hard work and ventures but I have come to realize the strong perception of the US dollar in some countries. As I live it here in Latin America, it is truly amazing the amount of perceived trust the centralized fiat of the United States have made around the world.

Given my previous travels, I knew that bringing dollars to countries is often easier to manage given the way commerce works in most countries in the region. I opted to bring some cash as I was sure that many merchants, particularly as we visited areas out of the normal path of tourists, would be dealing in fiat instead of cards. My preferred way to transact here has been credit cards to avoid the issue with effective converting currencies and due to the fact that past experiences have led me to trust the institution I use in that it would not take more than a reasonable cut in fees for the transaction. This has been important for me as previous experiences and even some of the exchanges I have seen offered around here were so different. For example, the day I was on the island beach town, I needed local fiat to buy something to drink for my daughter so I walked to the local hotel where they gave me 2,500 Colombian pesos per US dollar. I knew it would be an attractive rate but in times of need and lack of alternatives, I went ahead with the exchange.

Source

Of course, I would check it out when I had the chance as saw that they made about 20% off the exchange! As I talked with the friends and family we are staying with, they told me that you can see exchanges range from 10-30% in normal conditions but that things have improved due to many locals playing the arbitrage game with the global financial systems. They told me that the best bet is normally going to a local bank branch and using our debit cards to directly access funds as it would be taken at a much better rate than these alternatives. Many local have played the game to use the bank to access local fiat and exchange them at these discounted rates to earn the difference! This made me go to the local bank branch and took out one million Colombian pesos for the week! I was a millionaire for a couple of minutes as my wife needs funds for a session with the hairstylist (which made home visits).

I was able to make the exchange for about 2,990 Colombian pesos per Dollar which was much better than the previous exchange although we can clearly see the spread that the institution made when seeing the rate on global markets. I actually had to call my bank to get clearance for the withdrawal and can only imagine the service fee I will find on my next statement for this which is why I took out the maximum. I intend to leave most of the local fiat here in the city as they are so many great people that live to serve and make our experience so much more enjoyable; but that is for a whole other post after I get back.

The reality is that these funds go a long way here. We went to a local supermarket shortly after the exchange and bought a number of bag of fresh produce. Whereas it would have been at least $100 back home, it was barely $45 (exchange fees included). I also took the kids to the local mall yesterday for a stroll and finished with us ending at the ice cream shop. This was a restaurant style ice cream place that seemed pretty high-end as it was located across from the local Hotel. Five scoops of ice cream later and it was only $8! I am not sure where you buy ice cream, but a scoop in most place back home go for at least $4 each! Dinner was a similar experience last night as we had drinks, a number of appetizers and food for 7 of us at a popular restaurant (almost a 45 minute wait), for about $250! I have spent that with my family of three in many places back home.

The dollar is definitely going a long way over here which is great from a vacation perspective. However, in speaking with the locals, the concern of a slowing economy already has them in fears of ongoing inflation and the lost of their buying power. They say that the most expensive thing for them are the groceries as food prices have continued to increase much faster than their ability to earn. Have in mind I am talking to a more middle class participant so imagine the difficulty for others. In another experience I had (will be on a future post), I was able to share with an entrepreneur that lives in the United States but took over a family business here locally. He said that the business environment here is tough as the taxation system has limited growth for the local population. This makes sense as I have been seeing that I am paying about 19% in Value Added Tax when buying most products here.

I have started to see this new perspective and has got me to think about how quickly these things change. While it has not changed my thoughts on my efforts to taking control of my monetary sovereignty with cryptocurrencies, it has given me a more calm approach at the velocity of doing so. I still believe that the coming challenges in the financial markets will stress the value of most fiat currencies as tools will be limited in combating the pressures of a debt bubble popping. However, it has felt good living a millionaire life for a week!

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